Shared Priorities, Strained Systems

Shared Priorities, Strained Systems: Modernizing State Grants and Contracts with Nonprofits Report #291 | January 2026 Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov LITTLE HOOVER Dedicated to Promoting Economy COMMISSION and Efficiency in California State Pedro Nava Government Chair Anthony Cannella The Little Hoover Commission, formally known as the Milton Marks “Little Hoover” Commission on California State Government Vice Chair Organization and Economy, is an independent state oversight agency. Dion Aroner* David Beier By statute, the Commission is a bipartisan board composed of five public members appointed by the governor, four public Senator Christopher Cabaldon members appointed by the Legislature, two senators and Assemblymember Phillip Chen two assemblymembers. Gil Garcetti* In creating the Commission in 1962, the Legislature declared José Atilio Hernández its purpose: Jason Johnson Gayle Miller ...to secure assistance for the Governor and itself in promoting economy, efficiency and improved services in the Senator Roger Niello transaction of the public business in the various departments, Assemblymember Liz Ortega agencies and instrumentalities of the executive branch of Janna Sidley the state government, and in making the operation of all state departments, agencies and instrumentalities, and *Served on study subcommittee all expenditures of public funds, more directly responsive COMMISSION STAFF to the wishes of the people as expressed by their elected representatives... Ethan Rarick Executive Director The Commission fulfills this charge by listening to the public, consulting with the experts and conferring with the wise. In the Tamar Foster course of its investigations, the Commission typically empanels Deputy Executive Director advisory committees, conducts public hearings and visits government Krystal Beckham operations in action. Daniel Harris-McCoy Its conclusions are submitted to the Governor and the Legislature Gibran Maciel for their consideration. Recommendations often take the form Shara McAlister of legislation, which the Commission supports through the Jenna Waite legislative process. Contacting the Commission All correspondence should be addressed to the Commission Office: Little Hoover Commission 925 L Street, Suite 805, Sacramento, CA 95814 (916) 445-2125 | littlehoover@lhc.ca.gov This report is available from the Commission’s website at www.lhc.ca.gov. Letter from the Chair January 2026 The Honorable Gavin Newsom Governor of California The Honorable Monique Limón The Honorable Brian Jones President pro Tempore of the Senate Senate Minority Leader and members of the Senate The Honorable Robert Rivas The Honorable Heath Flora Speaker of the Assembly Assembly Minority Leader and members of the Assembly DEAR GOVERNOR AND MEMBERS OF THE LEGISLATURE: California’s nonprofit partners play an indispensable role in extending state capacity. They provide essential services to millions of Californians, employ more than 1.7 million workers, and serve communities government often cannot reach on its own. In undertaking its study of California’s grant and contract administration with nonprofits, the Commission sought to understand whether the state’s administrative systems have kept pace with the state’s reliance on these partners. The Commission found that these systems have resulted in many nonprofits, especially smaller, less-resourced organizations serving California’s most vulnerable residents, experiencing persistent cash flow instability, delayed reimbursements, insufficient cost recovery, and redundant reporting requirements, among other obstacles. These challenges are not abstract. They hinder service delivery, limit who can afford to partner with the state, and ultimately jeopardize the effectiveness of programs the state relies on to advance public health, environmental conservation, and economic wellbeing. No organization providing services on behalf of the State of California should be forced to subsidize those services from its own reserves, scale back programs, or take out loans simply to meet state requirements. Yet many do. The recommendations contained within this report provide practical and achievable means to ensure that state investments reach communities efficiently and equitably while reducing administrative burdens, improving accountability, reinforcing service continuity, and modernizing processes. The Commission respectfully submits these findings and recommendations, and stands ready to assist in strengthening California’s relationship with its nonprofit partners. Sincerely, Pedro Nava, Chair Little Hoover Commission Table of Contents EXECUTIVE SUMMARY .......................................................................1 STATE GRANT AND CONTRACT ADMINISTRATION WITH NONPROFITS ......................................................................................3 BACKGROUND .................................................................................................3 RECOMMENDATIONS ......................................................................................8 APPENDIX A: SUMMARY OF RECOMMENDATIONS ...............................15 ENDNOTES .............................................................................................................16 EXECUTIVE SUMMARY California relies on nonprofit organizations to disadvantage less-resourced organizations and deliver public services, ranging from healthcare to constrain their ability to remain viable partners. environmental protection programs. With more than 109,000 nonprofits employing 1.7 million Californians Beyond financial barriers, grant and contract terms and contributing 15 percent of the state’s GDP, these often create avoidable administrative burdens. State organizations form a critical extension of government agencies do not always use the full duration of grant capacity. Yet a survey the Commission conducted cycles authorized by the Legislature, creating staffing with the California Association of Nonprofits, difficulties and repeated application and awards work hearings, and research reveal that the state’s grant for nonprofits and state personnel alike. Likewise, the and contract administration has not kept up with the ability to be flexible in emergencies, such as wildfires environment in which the state’s partners operate. and public health crises, demands a clear and Many nonprofits absorb financial risk and navigate consistent mechanism for rapidly amending existing administrative systems that are often duplicative and contracts. Without such a process, organizations slow. These challenges undermine the sustainability attempting to adapt their services risk contract of California’s nonprofit partners and the state’s noncompliance and funding or service disruptions. ability to deliver timely, effective services. Administrative complexity, such as burdensome Findings application processes and extensive reporting requirements, is another challenge faced by the The Commission’s findings show that cash flow state’s nonprofit partners. Many organizations spend instability is one of the most persistent strains on dozens of hours producing reports that receive little the state’s nonprofit partners. Because state awards acknowledgement or feedback. This is particularly often rely on reimbursement rather than advance problematic for organizations that cannot afford payment of grant funds, nonprofits must front dedicated grantwriting staff. operational costs before receiving their grant funding. Less-resourced organizations serving disadvantaged State agencies also face significant challenges when communities, which recent legislation has mandated the state does not provide centralized guidance state agencies to prioritize, are the least-equipped to on advance payment procedures and other carry these financial burdens. Payment delays further grant administration issues, resulting in differing exacerbate the problem. Many nonprofits are forced interpretations of statute. Agency staff must to tap reserves, take out lines of credit, and even spend considerable time navigating ambiguous reduce services or lay off personnel while waiting requirements, only to learn about differing to be reimbursed. The costs of these delays are real expectations from the state after an audit. This and borne by the employees who keep the programs impedes statewide implementation of innovative running and the communities who rely on them. practices. At the same time, indirect cost reimbursement Recommendations routinely falls short of actual costs. Substantial The Commission recommends 12 reforms designed portions of administrative expenses remain to make state-nonprofit relationships more efficient uncovered, requiring nonprofits to subsidize the and sustainable. state’s programs with their own resources. Without a standardized statewide approach, indirect cost rates 1. The State of California should mandate, at a vary widely by agency, sometimes dipping as low as minimum, that 25 percent of a contract be paid 5 percent, witnesses testified. Such practices further up front to nonprofits. Ultimately, the state SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 1 should go further and award 100 percent of grant government. Where it has the authority, funds upfront to nonprofits that have been in it should require its local government partners good standing with the state for at least three to do the same. years. b. Reduce reporting frequency. 2. The State should negotiate with nonprofit representatives to determine a grant payment 7. The State of California should require state schedule that ensures all 501(c)(3) organizations agencies to provide feedback to nonprofits on why with a state contract are paid in a timely manner, submitted information or documents are rejected. while providing flexibility for state agencies 8. The State of California should establish a nonprofit working with lower-capacity nonprofits. The liaison office within the Office of the Governor. Prompt Payment Act should then be amended to reflect these agreed-upon timelines. This 9. The State of California should establish plain- negotiation should be completed no later than language centralized guidance on grant and December 31, 2026. contract administration, including advance payment and prompt payment. 3. The State of California should ensure that its nonprofit partners are sufficiently reimbursed 10. The State of California should provide training for their indirect costs. The state should do this and opportunities for peer learning, such by, at a minimum, tying statewide indirect cost as roundtables, for both state agencies and rates to the federal de minimis rate, and allowing nonprofits on topics related to grant and contract negotiated higher rates with justification. administration, including advance payment. 4. When the Legislature authorizes grant cycles 11. The State of California should streamline for a certain number of years, state agencies grant management processes within the State should issue grants for the maximum length Controller’s Office by: of the cycle to minimize start-up and wind- down activities and increase stability for the a. Creating a specialized grant payment organizations performing the grant activities processing unit. and the Californians they serve. Additionally, the state should allow for easier grant renewals for b. Adopting statewide electronic funds nonprofits that exceed performance metrics on transfers for grants. prior grants. 12. The State of California should standardize state 5. The State of California should create a grant reporting through a uniform portal. Ideally, standardized process by which state agencies this would be part of a larger process to create a and nonprofits can quickly amend a contract streamlined application and grant management during a state of emergency to allow the system, with a goal of reducing the administrative nonprofit to better provide the services it was burden for both nonprofits and state agencies. contracted to perform. 6. The State of California should audit its grant reporting requirements across all grants. Where possible to do without weakening oversight, it should: a. Harmonize future state grant reporting requirements with those of the federal 2 | LITTLE HOOVER COMMISSION State Grant and Contract Administration with Nonprofits Nonprofit organizations are essential to California’s Government Grants vs. economy and service delivery. Approximately 109,000 nonprofits employ more than 1.7 million Nonprofits Californians and contribute 15 percent of the state’s Gross Domestic Product.1 Critically, the state relies on The terms “grants” and “contracts” are often nonprofits to deliver essential services. For example, used interchangeably, although different the state depends on nonprofits to provide services levels of government use their own distinct comprising a third of Medi-Cal’s budget.2 definitions. The State of California refers to contracts as legally-binding agreements used In January 2025, the Little Hoover Commission to acquire services, which are specific in topic, partnered with the California Association of scope, budget, and outcomes, whereas grants Nonprofits to survey the state’s nonprofits about are used to provide services to a community, their experiences applying for and managing grants and are generally more flexible in nature than and contracts from California state government contracts. Conversely, the federal government agencies. The Commission additionally held hearings differentiates the two by whether the public to explore state grant and contract administration (grants) or the government (contracts) challenges with nonprofits. This study also builds on benefit.3 the Commission’s prior work with nonprofit service providers during its intimate partner violence study. Background The Commission found systemic challenges that often result in nonprofits subsidizing the delivery of The Commission’s survey of California nonprofits, state services as they wait to be paid or struggle to with nearly 400 respondents, and public hearings cover costs not covered by grants. In some cases, found pervasive challenges in the state’s grantmaking nonprofits spend excessive amounts of time and and contracting processes. These findings paint other resources meeting requirements that do a troubling picture of a lack of administrative not always seem to be justified. On the state side, consistency and systemic inefficiencies that impede the Commission found teams of dedicated people the effectiveness of the state’s partnerships with committed to making the partnerships work while nonprofits. also being responsible stewards of taxpayer dollars CASH FLOW CHALLENGES, PAYMENT who want clearer guidance from those making the DELAYS, AND COST RECOVERY decisions. Correcting these challenges is essential to In recent years, the state has shifted its approach ensuring the sustainability of the state’s partnerships to grantmaking. It has committed itself to assisting with nonprofits and consequently, the delivery of the most underserved communities and directing important services to some of California’s most grant dollars to the nonprofits working in these vulnerable populations. communities. Nonprofits assisting California’s most vulnerable often comprise members of This report presents twelve policy recommendations the communities they’re serving and often are designed to strengthen California’s partnership smaller and less-resourced than the larger, more with nonprofits, improve administrative efficiency, sophisticated nonprofits that are household and ensure that taxpayer dollars are used to their names. To direct state grant dollars to underserved maximum impact. SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 3 communities, AB 590 (Hart), enacted in 2023, This should help the nonprofit cover the costs of specifically instructed state agencies to “prioritize providing the services instead of having to wait to recipient entities and projects serving disadvantaged, be reimbursed. The state has for some time allowed low-income, and under-resourced communities or advance payment in certain programs. In 2017 and organizations with modest reserves and potential 2018, for example, legislators passed a series of bills cashflow problems.” This followed AB 156, a budget enabling recipients to receive 25 percent of funds trailer bill from 2022 that created an advance upfront for grants related to forest health and wildfire payment pilot project, which charged state agencies prevention.4 In 2021, the Governor and Legislature with the same thing. enacted legislation allowing the Governor’s Office of Emergency Services to fund its portion of one grant This shift in focus to where the state sends its for domestic violence intervention in advance.5 In grant dollars is important when examining grant 2022, six agencies were allowed to pilot advance and contract administration challenges, because payments of up to 25 percent of the grant total to while no nonprofit should have to subsidize the grantees that met specific requirements.6 In 2023, delivery of state services, the ones currently doing legislation allowed up to 25 percent of a contract to so when systems falter often are the ones least be awarded up front for most new state grants and able to afford it, serving the communities least contracts.7 able to weather disruptions in service delivery, and staffed by employees least likely to have a safety Despite this flurry of legislative activity, about 40 net to withstand financial unpredictability. Similarly, percent of the Commission’s survey respondents state employees increasingly are working with reported they have never received an upfront organizations that do not have teams of grantwriters payment.8 Since the 2023 legislation applied to new or deep institutional knowledge of how state contracts, the Commission conducted a one-day processes work. snapshot of new grant opportunities in California state government to understand the landscape Reimbursement model vs. advance payment. currently faced by nonprofits. On this day, state The traditional way the state pays nonprofits for agencies were accepting applications from nonprofits service delivery is through reimbursement. A for slightly more than 100 grant opportunities, worth simplified summary of the reimbursement model is about $2.7 billion.9,10 About two-thirds of these would that nonprofits provide the contracted services to be disbursed on a reimbursement basis only, with the Californians, then submit proof of providing those remaining third offering the potential for at least one services to the state to be reimbursed. The agency advance payment.11 In only three of the 107 grants in that manages the contract verifies that the services the snapshot was an advance payment guaranteed.12 have been provided in accordance with the contract, then submits a request to the State Controller’s Office Delayed payments. Nearly one-quarter of survey to cut a check to the nonprofit for the amount to be respondents indicated it typically takes them more reimbursed. The State Controller’s Office then mails than three months for reimbursement.13 These a paper check to the nonprofit. This model requires delays are not merely administrative inconveniences: that the nonprofit have the ability to pay for the They create real financial hardship. One nonprofit employees, resources, and overhead to provide the executive told the Commission that their organization service before receiving any money from the state. carried accounts receivable for multiple contracts with the state worth a combined $945,000 for more An alternative payment model is called advance than seven months.14 payment. As the name suggests, some or all of the funds are provided to the nonprofit upfront. Of nonprofits receiving late payments, nearly three- 4 | LITTLE HOOVER COMMISSION quarters reported moderate to severe impacts to timely manner; however, this broad expansion will have their operations.15 “Operational impacts” have real a significant impact across all state agencies that are consequences for the employees of these nonprofits currently working to decrease administrative costs.”20 and the people they serve. These include: Grant administrators at various government agencies ◊ Using reserve funds to bridge the funding told Commission staff they had concerns about gap (64 percent of respondents). working with the lower-capacity organizations that ◊ Reducing programs and services (21 percent tend to win awards when the state prioritizes grants of respondents). to organizations with modest reserves and potential ◊ Taking out loans or credit (21 percent or cashflow issues. Lower-capacity organizations, respondents). they said, tend to require more effort on the state agency’s part to submit the materials required to be ◊ Reducing staff (11 percent of respondents). paid. Officials said that submission of the materials ◊ Freezing or reducing employee compensation sometimes takes longer than the timeframe necessary (10 percent of respondents).16 to submit the payment request to the State Controller’s Under current law, the Prompt Payment Act requires Office. It would be unfair, they argued, to financially state agencies to pay grants within 45 days of penalize the state agencies that were following the receiving an undisputed invoice. If the deadline is law by prioritizing lower-capacity organizations for the not met, the state pays late penalties. However, only predictable challenges that emerge when working with organizations with contracts less than $500,000 are these groups. eligible to receive penalties. This arbitrary threshold leaves many nonprofits without protection against Indirect cost recovery/administrative overhead. payment delays, creating a two-tiered system Nearly 60 percent of survey respondents reported wherein larger contracts lack the same payment not receiving sufficient funding for indirect costs, protections as smaller contracts. Additionally, the which include expenses such as rent, utilities, and Prompt Payment Act currently defines grants as administrative oversight.21 While federal rules require agreements between government agencies and nonprofits hired with federal dollars to be reimbursed organizations authorized to accept grant funding for for indirect costs at a rate of either 15 percent or a victim services or prevention programs administered higher rate that has been negotiated and approved by state agencies, or restoration activities performed by a federal agency,22 no such rule exists for California by a resource conservation district,18 leaving a wide state grants.23 range of activities unprotected. Currently, the share of indirect costs that nonprofits Multiple bills have been introduced in recent years can recover, unless specified in the authorizing statute, to expand the Prompt Payment Act to cover all is determined by the state agency administering the nonprofit grants, remove the $500,000 penalty award. Multiple agencies cap indirect rates as low as 5 exception, and adjust the terms at which an invoice percent, far below the federal de minimis of 15 percent. may be disputed.19 Some agencies require splitting this 5 percent across all subcontractors, said witnesses, leaving partners with State officials, however, have sometimes sounded little administrative support.24 cautious about expanding the Prompt Payment Act. In his veto message on one of these bills, Governor Indirect costs are real and tangible expenses that must Newsom worried about the impact of expanding be paid if an organization is to continue operations and the Prompt Payment Act on departmental budgets, provide services. Consequently, the gap between actual writing, “I also understand the goal of ensuring that cost and reimbursement rates forces nonprofits to our nonprofit partners are receiving payments in a subsidize state programs with their own resources. SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 5 CONTRACT TERMS preserve service continuity and fiscal stability during Grant duration. The Commission learned that state crises.28 agencies do not always utilize the full grant period ADMINISTRATIVE BURDEN AND authorized by the Legislature. For example, the COMPLEXITY Legislature allows state Trauma Recovery Centers Grant applications. Government grant opportunities – which provide wraparound services to survivors typically are reviewed based on an objective set of of trauma – to operate on three-year grant cycles. factors, such as alignment with funding priorities However, the California Victim Compensation Board or organizational capability, and scored via a operates the grant on a two-year cycle.25 This points system. To meet evaluation criteria, some creates difficulties in hiring during the second year, applications require extensive documentation and due to funding uncertainty, as well as placing an meticulous adherence to complex requirements. administrative burden on programs in both winding Nonprofits contend they spend an inordinate amount down the current grant and applying for a new of time on grant applications, taking resources and one, testified National Alliance of Trauma Recovery focus away from implementation.29 Centers Director of Training and Technical Assistance Stacey Wiggall. It also, she pointed out, increases Nonprofit representatives also report shifting the administrative burden on the state by having to requirements and unclear guidance, and say that develop and manage more frequent grant awards state agencies often refuse to provide guidance, processes.26 saying “you need to determine that,” instead of providing support.30 Flexibility in emergencies. During natural disasters, public health emergencies, and other Frustration culminates when submitted information urgent situations, nonprofit partners might need to or documents are rejected without explanation. expand services, alter delivery models, or operate Commission survey respondents reported that they under extraordinary conditions, but existing state typically are notified when they are not selected contracting rules lack a mechanism that allows for an award, but nearly half of those received only for swift adjustments. Currently, the California a general form letter without specific feedback. Emergency Services Act empowers the governor to Fewer than 20 percent of respondents were suspend certain regulations during emergencies but offered substantive feedback on why they were not does not provide guidance for nonprofit contractors selected.31 seeking to adapt services or budgets to new conditions.27 Reporting requirements. Nearly two-thirds of grant These limitations became particularly evident recipients reported facing burdensome reporting during the COVID-19 pandemic. A 2020 survey by requirements – the most frequently cited challenge the California Association of Nonprofits found that among survey respondents.32 Nearly 60 percent of 86 percent of respondents required changes to their organizations with experience managing state grants state contracts due to pandemic-related disruptions, indicated they have been challenged by complex while 68 percent received inconsistent guidance application processes.33 from agencies and 69 percent needed to reallocate Current reporting practices focus on compliance funds across budget categories to continue serving minutiae rather than outcomes and impact, their clients. Many nonprofits were still legally testified Kate Gordon, CEO of California Forward, a bound by original contract terms that no longer Sacramento-based nonprofit devoted to facilitating reflected operational realities, forcing them to risk a resilient, sustainable, and inclusive economy.34 noncompliance or halt services altogether. This Nonprofit representatives described spending more demonstrated the need for the state to take action to than 40 hours per report on unfunded administrative 6 | LITTLE HOOVER COMMISSION tasks. California Forward had to hire a dedicated excellent if some of the more comprehensive grants contractor to handle reporting requirements, had an evaluation built into the program requirements ultimately losing money on their grant.35 and enough funding added to the grant allocation to support outcome evaluation, data collection, and the During the Commission’s hearings on intimate infrastructure to do it.36 partner violence in 2019, Beth Hasset, Chief IMPACT ON SERVICE DELIVERIES AND Executive Officer and Executive Director of DISPARITIES WEAVE, a Sacramento-based domestic violence The consequences of these challenges extend shelter, described the frustrations of reporting to communities in need. Following unsuccessful requirements: applications, 76 percent of nonprofits reported delaying new initiatives, while 53 percent were The amount of data we are expected to provide to the forced to eliminate or reduce programs or services.37 government is excessive and redundant. … The complexities of state grant administration fall The biggest aggravation is that the information being harder on smaller organizations. Nearly all of the reported is duplicated in the various reports, but each Commission’s survey respondents who had not entity… ask[s] for the information to be reported in received any state awards were micro-nonprofits a different way--different quarters, different funding with annual budgets of $250,000 or less, while more periods, etc.--so it’s not like we can just copy and than two-thirds of respondents who had received an paste the information. Additionally, we rarely receive award reported a budget of at least $1 million.38 feedback on the reports we submit, unless there’s an error or a correction needed. It would be beneficial Organizations with larger staffs were more likely to know how the information is being used to inform to have received awards. More than a quarter of future funding needs, etc. … survey respondents that received awards employed 50 or more workers, compared to just 9 percent of The various grants programs are unique, but the organizations that had never received an award.39 services being provided are not. So much of what we do This disparity suggests that current grant and as an agency crosses over between the programs, but contract administration practices create barriers each funder has their own requirements for reporting that disproportionately affect smaller organizations, back the information, so we have to work continuously many of which serve the most vulnerable and hard- to maintain our database in an effort to reduce the to-reach populations. amount of time it takes to export the data in order to meet these specific requirements. And most of the The survey findings make clear that current data reported is widgets (# of people served, # of grantmaking and contracting practices not only services, # of things, etc). There is almost no outcome burden nonprofits but also undermine the state’s or qualitative data built into the grant requirements ability to efficiently deliver services to Californians. which means there is very little built into data collection Reform is both necessary and urgent. and reporting, or outcome evaluation. It is ironic that we spend all of our time counting these widgets yet the number of widgets has no correlation to the amount of money provided to do the work. … It isn’t lost on us that our largest [private] funders don’t actually require or request this information. It would be great if the State cared whether the programs they invest in are having an impact of the recipients of the services. It would be SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 7 RECOMMENDATIONS PAYMENT: ENSURING TIMELY AND advance payments remain underused relative ADEQUATE FUNDING to statutory authority, a signal that permissive Effective nonprofit service delivery requires provisions have not translated into consistent adequate and timely payment. The current system’s practice. Without a mandate, agencies default reliance on reimbursement creates cash flow to familiar reimbursement-based approaches, challenges that disproportionately harm smaller perpetuating cash flow challenges that organizations and those serving disadvantaged disproportionately harm smaller and less-resourced communities. The Commission has identified three nonprofits. reforms to address these challenges. The recommendation to ultimately extend 100 Recommendation 1: The State of California percent advance payment to nonprofits in good should mandate, at a minimum, that 25 percent standing for at least three years recognizes that of a contract be paid up front to nonprofits. established partners with proven track records Ultimately, the state should go further and present fewer unknowns for the state. This tiered award 100 percent of grant funds upfront to approach would balance risk management with nonprofits that have been in good standing with equity for trusted partners, reserving the highest the state for at least three years. level of advance payment for organizations that have demonstrated consistent performance and Organizations consistently testified that advance compliance over multiple years. payments are critical, as they need to hire staff and put programs into place before providing services. Recommendation 2: The State should negotiate The alternative compels nonprofits to operate as de with nonprofit representatives to determine a facto lenders to the state, with some organizations grant payment schedule that ensures all 501(c) securing loans with interest to cover upfront costs (3) organizations with a state contract are paid – an arrangement that results in nonprofits paying in a timely manner, while providing flexibility interest charges to perform state-contracted work. for state agencies working with lower-capacity nonprofits. The Prompt Payment Act should Multiple state programs have successfully then be amended to reflect these agreed-upon implemented advance payment, demonstrating both timelines. This negotiation should be completed feasibility and benefit. For example, the Strategic no later than December 31, 2026. Growth Council’s Regional Climate Collaboratives and Community Resilience Center programs,40 The recommendation for negotiation recognizes the California Air Resources Board’s Access Clean that uniform timelines may not suit all of the California,41 the California Environmental Protection state’s goals when issuing grants. A collaborative Agency’s Environmental Justice Action Grants,42 and negotiation process would enable the state and some programs administered by the State Water nonprofit representatives to develop realistic, Resources Control Board all embed procedures into equitable timelines that balance accountability with their grant requirements to ensure proper oversight operational needs. The December 31, 2026, deadline of advanced funds.43 A 2025 Department of Finance provides adequate time for meaningful consultation report to the Legislature of the pilot advance while preventing the problem from being put on payment programs authorized in 2022 indicated a back burner. Should the state fail to meet the 26 advance payments were issued, with the 2026 deadline to negotiate terms agreeable to both department’s audits having no adverse findings.44 the state and nonprofits, the Prompt Payment Act should be amended to provide equal protection to The Little Hoover Commission’s survey found that 8 | LITTLE HOOVER COMMISSION all types of grants. this part or that part.’… That’s not considered an okay response in the private sector. For nonprofits, it’s the Payment delays have consequences beyond their same. When we say this is what it costs to really do impacts to nonprofits, their employees, and the the work, we mean all of those things.”49 communities they serve. Nearly 40 percent of survey respondents said they refrained from applying for a Under-recovering indirect costs does not eliminate state grant or contract over payment timing issues,45 those costs; it merely shifts who pays for them. A raising the question: Who will perform this work if federally-aligned floor with the option to negotiate the state’s nonprofit partners do not? higher, justified rates improves competition by ensuring all applicants can realistically deliver on Recommendation 3: The State of California should their proposals and enhances stability by ensuring ensure that its nonprofit partners are sufficiently nonprofits can sustain operations over the full reimbursed for their indirect costs. The state contract term. should do this by, at a minimum, tying statewide indirect cost rates to the federal de minimis CONTRACT TERMS: ENSURING FAIR AND SUSTAINABLE PARTNERSHIPS rate, and allowing negotiated higher rates with Beyond payment timing and adequacy, the substance justification. of grant and contract terms significantly affects the ability of nonprofits to deliver services on behalf As noted earlier, nearly 60 percent of the of the state. Two reforms would help the state Commission’s survey respondents reported receiving implement programs effectively and allow necessary inadequate funding for indirect costs. Continuing flexibility during emergencies. a trend, this gap between actual indirect costs and reimbursement rates obliges nonprofits to Recommendation 4: When the Legislature subsidize state programs with their own resources. authorizes grant cycles for a certain number Aligning state grants with federal policy would allow of years, state agencies should issue grants for nonprofits without a negotiated rate to claim a 15 the maximum length of the cycle to minimize percent de minimis rate on indirect costs.46 start-up and wind-down activities and increase stability for the organizations performing the There have been prior legislative attempts to improve grant activities and the Californians they serve. reimbursement of indirect costs for grantees.47 Additionally, the state should allow for easier Governor Newsom vetoed one such effort, writing, grant renewals for nonprofits that exceed “this bill could have unintended consequences performance metrics on prior grants. by allocating a significant amount of grant funding toward indirect costs, rather than project Short grant cycles create hiring and continuity implementation, which would create cost pressures barriers that undermine program quality and to balance services to Californians.”48 organizational stability for nonprofits. Funding and job uncertainty make it difficult to hire towards If the reimbursement for indirect costs is insufficient the end of a grant cycle, and applying for the next to cover the legitimate expense to provide the round of a grant places an administrative burden on service, then the state’s nonprofit partners are programs. subsidizing the delivery of public services. As California Association of Nonprofits Chief Executive Brief grant cycles also impose administrative burdens Officer Geoff Green explained, “We would never walk on agency staff, who must develop and manage into our favorite coffee shop and ask how much for the grant award process over a shorter period. the latte, and they tell you it’s $3, and you say, ‘Great, The cycle of solicitation, review, award, and close- I’ll give you $1.75 because I don’t feel like paying for SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 9 out consumes substantial staff time and diverts declarations), streamlined approval procedures attention from program monitoring and technical that delegate authority to appropriate levels, assistance that could improve grantee performance and documentation requirements that balance and outcomes. accountability with speed. It should also clarify which types of amendments, such as service Maximizing the allowable grant cycles would address delivery changes or temporary location shifts, are these problems by reducing the time spent by permissible under expedited review versus those nonprofits and state personnel on grant applications requiring standard approval processes. and awards. It allows more time for programs to demonstrate outcomes, particularly for complex COMPLIANCE: BALANCING ACCOUNTABILITY WITH EFFICIENCY interventions addressing issues like trauma, housing Effective oversight requires meaningful reporting, instability, or workforce development. It enables but current practices often emphasize process organizations to make multi-year staffing and compliance over outcome measurement. Two operational commitments, improving recruitment reforms would refocus reporting on achieving and retention of qualified personnel. the state’s desired outcomes while reducing unnecessary burdens. A performance-based renewal pathway would conserve administrative capacity for both agencies Recommendation 6: The State of California and grantees while protecting outcomes. The state should audit its grant reporting requirements already provides performance-based renewal across all grants. Where possible to do without incentives for select programs: Existing domestic weakening oversight, it should: violence shelter service provider grantees, for example, are permitted to skip the competitive grant a. Harmonize future state grant reporting process when reapplying for funds.50 requirements with those of the federal government. Where it has the authority, Recommendation 5: The State of California it should require its local government should create a standardized process by which partners to do the same. state agencies and nonprofits can quickly amend a contract during a state of emergency to allow b. Reduce reporting frequency. the nonprofit to better provide the services it was contracted to perform. Harmonizing state reporting requirements with federal requirements, where possible, would Establishing a standardized process to rapidly provide multiple benefits. Many nonprofits receive amend a contract would enable nonprofits to both federal and state funding, often for related maintain service delivery during disruptions without or complementary work. Currently, they must lengthy bureaucratic delays. It would provide clear navigate different reporting templates, metrics, procedures that both state and nonprofit personnel timelines, and submission systems for each funding understand in advance, reducing confusion during source. This duplication wastes staff time that emergency situations. And, it would signal the state’s could be spent on program delivery. Additionally, recognition that emergencies require adaptive harmonization would facilitate cross-jurisdictional management rather than rigid adherence to pre- learning and comparison. When similar programs emergency plans. use similar reporting metrics, policymakers can more easily identify effective practices and areas for The standardized process should include clear improvement across different implementations. triggers for when expedited amendments are available (such as gubernatorial emergency 10 | LITTLE HOOVER COMMISSION This recommendation acknowledges that expectations. harmonization may not be appropriate for all grants. Some state programs address unique California It is reasonable to be concerned about the impact priorities or serve populations not covered by federal providing feedback may have on agency staff time, but programs. In these cases, state-specific reporting the amount and type of feedback can be adjusted as may be necessary. However, the default should be to appropriate. Templates and checklists can be used for harmonize reporting, unless there is a clear reason organizations weeded out of the competitive process not to. for the most common reasons, while debrief calls with the ability to ask questions can be reserved for The same concept applies to the frequency of applicants that reach the final review stages. reporting. Quarterly narrative reports have become a common practice, but the state should consider CREATING THE INFRASTRUCTURE FOR SUCCESSFUL GRANT ADMINISTRATION whether it should be. Philanthropy, for example, largely relies on annual reporting.51 There may be Beyond reforms to payment, contract terms, and situations that call for frequent reporting, such as compliance, California must develop the infrastructure a project in rapidly-changing conditions, but not all to support effective state-nonprofit partnerships. These situations require it. It is important that reporting five recommendations can help create the foundation provide meaningful information about a program’s for success. impact instead of merely providing a snapshot of activity. Recommendation 8: The State of California should establish a nonprofit liaison office within the Office Recommendation 7: The State of California should of the Governor. require state agencies to provide feedback to nonprofits on why submitted information or The consistent theme throughout this report has been documents are rejected. that far too often, California’s nonprofit organizations subsidize the delivery of state services and expend As noted above, fewer than 20 percent of large amounts of time and resources to do so. While respondents were offered substantive feedback some departments have adopted forward-thinking on why their application package was rejected,52 strategies for grant administration, others are more often after spending extensive amounts of time cautious. With 236 state agencies, departments, completing it. This absence of feedback represents a commissions, boards, and other entities comprising missed opportunity for both the state and nonprofit nearly 230,000 employees,53 in many ways it is applicants. For nonprofits, constructive feedback unsurprising that the state might have inconsistent enables continuous improvement, helps them better approaches to grant administration. However, the state understand state priorities and expectations, and can and should adopt a more unified approach. allows them to submit stronger applications in future cycles. For the state, providing feedback encourages A liaison office within the Office of the Governor could high-quality reapplications. provide both interagency coordination and serve as a resource for nonprofits wishing to partner with the Lack of feedback can be particularly harmful state. The Commission recommends that this office to smaller organizations and those serving be located within the Office of the Governor because disadvantaged communities that may lack dedicated that is where the state’s liaison with philanthropic grant writers or possess institutional knowledge organizations resides, providing potential opportunities of state contracting processes. Without feedback, for collaboration and cooperation. Nonprofit they may repeatedly make the same errors or fail to representatives have identified other locations, such as understand how their proposals fall short of state the Department of Finance, where such an office also SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 11 may be useful. above, only to learn when being audited that they should have done something differently. As noted At an August 2025 Joint Hearing of the California earlier, no audits of advance pay practices have Senate and Assembly Select Committees on the resulted in adverse findings,56 so these smaller Nonprofit Sector, the California Association of issues arise from different interpretations of statute Nonprofits proposed creating an Office of Nonprofit and different prioritization of best practices between Empowerment to “serve as a formal bridge between the administering agency and the auditing agency. government and the nonprofit sector.”54 Key functions of this office would include: While one size cannot fit all programs given the diversity of state grant programs, central guidance ◊ Policy research and development. can provide core definitions and establish baseline ◊ Interagency coordination. expectations while allowing program-specific ◊ Technical assistance to nonprofits. adaptations. Shared resources such as FAQs, checklists, and templates can be adaptable to ◊ Training and education.55 different contexts while providing consistency on The liaison office recommended by the Commission fundamental issues. The State Contracting Manual would accomplish these goals, and would be already provides this type of centralized guidance ideally positioned to implement the Commission’s for procurement generally, demonstrating that following recommendations, with the exception standardized guidance can coexist with program- of Recommendation #11 for the State Controller’s specific requirements. Office. Recommendation 10: The State of California Recommendation 9: The State of California should provide training and opportunities for should establish plain-language centralized peer learning, such as roundtables, for both guidance on grant and contract administration, state agencies and nonprofits on topics related including advance payment and prompt to grant and contract administration, including payment. advance payment. In interviews with Commission staff, agency Regular statewide convenings could address personnel consistently requested uniform guidance emerging issues, share innovations and best on how to implement innovative grant management practices, and build relationships across state practices. While some agencies and departments agencies and between the state and its nonprofit have published agency- or program-specific partners. Roundtables provide particularly valuable guidance on advance pay practices, for example, learning opportunities because they enable peer- these guidelines typically reflect the agency’s own to-peer exchange rather than top-down instruction. interpretation of statute and do not necessarily Training and peer-learning opportunities could be correspond with another agency’s interpretation. organized by topic (e.g. advance payment), program Different guidance from different departments area (e.g. economic development), by organizational can hinder nonprofits applying for state grants, size (e.g. micro-nonprofits), among many other but it also presents a problem for state agencies categories. The nonprofit liaison office, if established when one agency administers a grant on behalf of per Recommendation #8, could coordinate these another, and one of those agencies is committed to exercises, ensuring they are documented for using advance payment while the other is not. those unable to attend, and lead to actionable improvements in practice. Agency officials also discussed the frustration of their extensive efforts to interpret statutes related to grant administration without any guidance from 12 | LITTLE HOOVER COMMISSION Recommendation 11: The State of California time between Controller approval and should streamline grant management processes recipient receipt. within the State Controller’s Office by: • Elimination of lost check problems, which a. Creating a specialized grant payment results in stop-payment requests and processing unit. reissuance. • Better tracking and documentation b. Adopting statewide electronic funds of payment dates for compliance and transfers for grants. accountability. To help cut down on payment delays, witnesses • Reduced administrative costs for check proposed creating a specialized grant payment printing, envelope stuffing, and mailing processing unit within the State Controller’s Office. • Enhanced security compared to This unit could: paper checks, which can be stolen or altered • Develop expertise in nonprofit-specific • Simpler reconciliation for state agencies and payment issues and requirements. nonprofits. • Create direct lines of communication with agencies and nonprofit payees for problem- Recommendation 12: The State of California solving when necessary. should standardize state grant reporting through a uniform portal. Ideally, this • Identify and resolve systemic bottlenecks. would be part of a larger process to create a streamlined application and grant • Track payment timelines and flag delays for management system, with a goal of reducing action. the administrative burden for both nonprofits • Provide technical assistance when and state agencies. necessary on proper invoice submission and processing. Nonprofits currently navigate disparate portals and formats, including Word-based budget Such a unit could also serve as a central resource for reports, across agencies. A uniform reporting implementing the Prompt Payment Act consistently portal with a single sign-on and reusable across all agencies and grant programs, ensuring that organization profiles containing documents such penalties are properly calculated and applied when as IRS Form 990s and certifications could reduce delays occur, should the Legislature decide to extend redundancy and errors.57 the Act’s protections to all grants. The Department of General Services already provides a Prompt Payment While the state already has the California Grants Advocate and FAQs for contractors: A parallel grants- Portal to provide a centralized database to locate focused function could triage issues impacting all grant and loan opportunities offered on a nonprofit grantees. competitive or first-come basis by California state entities, this portal primarily serves as a listing California’s continued reliance on paper checks service rather than an integrated application and instead of electronic payments as standard practice management system. Private foundations, like is anachronistic and embarrassing for the world’s the Irvine Foundation, could provide a model 4th largest economy and home of Silicon Valley. for integrated systems. The Irvine Foundation’s Switching to grant payments by electronic funds portal retains the organization’s IRS Form 990, transfer could result in: audit records, insurance forms, and other • Faster payment processing, reducing the SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 13 documentation, which witnesses said reduces their administrative burden while providing easy access for the funder to ensure accountability.58 The benefits of a unified system could include: 1. Nonprofits could maintain a single profile with documents accessible to all agencies, eliminating redundant submissions. 2. Standard application templates, which would reduce the time spent reformatting information for different agencies. 3. Consistent reporting interfaces, which could help reduce errors. 4. State agencies could share due diligence information, eliminating redundant background checks and vetting. 5. Data could be aggregated to analyze statewide trends and identify best practices. 6. Technical issues could be addressed systemically, rather than program-by-program. Importantly, the system must be developed with extensive input from both nonprofit users and state agency staff to ensure it meets actual operational needs. While there would be upfront costs to building a portal, these would be balanced by eliminating the ongoing costs of the state’s current, fragmented system, including the costs of redundant data entry and time spent navigating multiple platforms. 14 | LITTLE HOOVER COMMISSION APPENDIX A: SUMMARY OF RECOMMENDATIONS 1. The State of California should mandate, at a a. Harmonize future state grant reporting minimum, that 25 percent of a contract be paid up requirements with those of the federal front to nonprofits. Ultimately, the state should go government. Where it has the authority, it further and award 100 percent of grant funds upfront should require its local government partners to to nonprofits that have been in good standing with do the same. the state for at least three years. 2. The State should negotiate with nonprofit b. Reduce reporting frequency. representatives to determine a grant payment 7. The State of California should require state agencies schedule that ensures all 501(c)(3) organizations with to provide feedback to nonprofits on why submitted a state contract are paid in a timely manner, while information or documents are rejected. providing flexibility for state agencies working with lower-capacity nonprofits. The Prompt Payment 8. The State of California should establish a nonprofit Act should then be amended to reflect these liaison office within the Office of the Governor. agreed-upon timelines. This negotiation should be completed no later than December 31, 2026. 9. The State of California should establish plain- language centralized guidance on grant and 3. The State of California should ensure that its contract administration, including advance payment nonprofit partners are sufficiently reimbursed for and prompt payment. their indirect costs. The state should do this by, at a minimum, tying statewide indirect cost rates to the 10. The State of California should provide training federal de minimis rate, and allowing negotiated and opportunities for peer learning, such higher rates with justification. as roundtables, for both state agencies and nonprofits on topics related to grant and contract 4. When the Legislature authorizes grant cycles for administration, including advance payment. a certain number of years, state agencies should issue grants for the maximum length of the cycle 11. The State of California should streamline grant to minimize start-up and wind-down activities and management processes within the State Controller’s increase stability for the organizations performing Office by: the grant activities and the Californians they serve. Additionally, the state should allow for easier grant a. Creating a specialized grant payment renewals for nonprofits that exceed performance processing unit. metrics on prior grants. b. Adopting statewide electronic funds transfers 5. The State of California should create a standardized for grants. process by which state agencies and nonprofits can quickly amend a contract during a state of emergency 12. The State of California should standardize state to allow the nonprofit to better provide the services it grant reporting through a uniform portal. Ideally, was contracted to perform. this would be part of a larger process to create a streamlined application and grant management 6. The State of California should audit its grant system, with a goal of reducing the administrative reporting requirements across all grants. Where burden for both nonprofits and state agencies. possible to do without weakening oversight, it should: SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 15 ENDNOTES Control Board. The program primarily offers low- interest loans to plan and construct water and wastewater facilities, but also offers grants and loan 1. California Association of Nonprofits. Office of forgiveness to help provide reliable access to clean Nonprofit Empowerment (ONE). Page 2. drinking water and wastewater treatment services to 2. California Association of Nonprofits and the small, disadvantaged communities. Because these Nonprofit Institute at the University of San Diego. 2019. nine programs principally designed to provide loans “Causes Count: the Economic Power of California’s dramatically skew the grant data, they are excluded Nonprofit Sector.” Page 7. https://calnonprofits. from the figures in this document. org/wp-content/uploads/2022/11/CausesCount- 11. California Grants Portal. August 13, 2025. “Show NewFindings-2019.pdf. Accessed October 27, 2025. all opportunities.” Filtered to show active grants 3. CalNonprofits. “Causes Count: The Economic for nonprofit applicants. Manually removed loan Power of California’s Nonprofit Sector.” 2019. opportunities that did not also include grants from https://calnp.memberclicks.net/assets/docs/ search results. https://www.grants.ca.gov/?s. CausesCountDownloads/CausesCount- 12. California Grants Portal. August 13, 2025. “Show NewFindings-2019.pdf all opportunities.” Filtered to show active grants 4. AB 1956 (Limón). Chapter 632, Statutes of 2018. Also, for nonprofit applicants. Manually removed loan AB 1530 (Gonzalez). Chapter 720, Statutes of 2017. opportunities that did not also include grants from search results. https://www.grants.ca.gov/?s. 5. AB 673 (Salas, 2021). Chapter 680, Statutes of 2021. 13. Little Hoover Commission. June 2025. “Issue Brief: 6. AB 156 (Budget trailer bill, 2022). Chapter 569, Survey on California State Funding for Nonprofits.” Statutes of 2022. Page 4. https://lhc.ca.gov/wp-content/uploads/ Report-289.pdf. Accessed October 27, 2025. 7. AB 590 (Hart, 2023). Chapter 535, Statutes of 2023. 14. Heidi Strunk, Chief Executive Officer, 8. Little Hoover Commission. June 2025. “Issue Brief: Mental Health America of California. August Survey on California State Funding for Nonprofits.” 28, 2025. Public comment at Little Hoover Page 4. https://lhc.ca.gov/wp-content/uploads/ Commission hearing. https://www.youtube.com/ Report-289.pdf. Accessed October 27, 2025. watch?v=G6UpwL25280&t=6266s. 1:44:26. 9. California Grants Portal. August 13, 2025. “Show 15. Little Hoover Commission. June 2025. “Issue Brief: all opportunities.” Filtered to show active grants Survey on California State Funding for Nonprofits.” for nonprofit applicants. Manually removed loan Page 8. https://lhc.ca.gov/wp-content/uploads/ opportunities that did not also include grants from Report-289.pdf. Accessed October 27, 2025. search results. https://www.grants.ca.gov/?s. 16. Note: Some organizations are affected in more 10. Most grants come from grant-only funding sources, than one way. Little Hoover Commission. June 2025. but nine of the grants in the one-day snapshot come “Issue Brief: Survey on California State Funding for from sources that also offer low-interest and other Nonprofits.” Pages 8-9. https://lhc.ca.gov/wp-content/ financing to accomplish the goals of the program. uploads/Report-289.pdf. Accessed October 27, 2025. Some of these are quite sizeable, such as the $110 million Small Community Clean Water/Wastewater 17. California Government Code. Section program administered by the State Water Resources 927.2(b)(1). https://leginfo.legislature. ca.gov/faces/codes_displaySection. xhtml?lawCode=GOV&sectionNum=927.2. 16 | LITTLE HOOVER COMMISSION 18. California Government Code. Section 27. Assemblywoman Alexandra M. Macedo, 33rd 927.2(b)(1). https://leginfo.legislature. District of California. Fact Sheet: AB 944: Support ca.gov/faces/codes_displaySection. Nonprofits Providing Essential Services. https://ct35. xhtml?lawCode=GOV&sectionNum=927.2. capitoltrack.com/25/bill/document?id=D657F67D- C882-4680-80F5-ED58256BC8DA. Accessed October 19. See AB 880 (2025, Bennett), SB 1246 (2024, Limón), 27, 2025. and SB 557 (2023, Limón). 28. Assembly Committee on Emergency Management. 20. Governor Gavin Newsom. September 28, 2024. April 28, 2025. Analysis: AB 944 (Macedo). https:// Veto Message: SB 1246. https://www.gov.ca.gov/wp- leginfo.legislature.ca.gov/faces/billAnalysisClient. content/uploads/2024/09/SB-1246-Veto-Message.pdf. xhtml?bill_id=202520260AB944#. Accessed October Accessed October 27, 2025. 27, 2025. 21. Little Hoover Commission. June 2025. “Issue Brief: 29. Little Hoover Commission. June 2025. “Issue Brief: Survey on California State Funding for Nonprofits.” Survey on California State Funding for Nonprofits.” Page 9. https://lhc.ca.gov/wp-content/uploads/ Page 7. https://lhc.ca.gov/wp-content/uploads/ Report-289.pdf. Accessed October 27, 2025. Report-289.pdf. Accessed October 27, 2025. 22. National Council of Nonprofits. “OMB Uniform 30. Kate Gordon, Chief Executive Officer, California Guidance Final Rule.” April 4, 2024. https://www. Forward. August 28, 2025. Written testimony to the councilofnonprofits.org/files/media/documents/2024/ Commission. Page 1. https://lhc.ca.gov/wp-content/ ncn-analysis-omb-uniform-guidance-final-rule-2024. uploads/Kate-Gordon-Chief-Executive-Officer- pdf. Accessed October 27, 2025. California-Forward-Testimony_-Improving-State- Grant-Administration-for-Nonprofits-002.pdf 23. SB 336 (Umberg, 2024). Office of Governor Gavin Newsom. SB 336 Veto Message. September 29, 2024. 31. Little Hoover Commission. June 2025. “Issue Brief: https://www.gov.ca.gov/wp-content/uploads/2024/09/ Survey on California State Funding for Nonprofits.” SB-336-Veto-Message.pdf. Accessed October 27, 2025. Page 7. https://lhc.ca.gov/wp-content/uploads/ Report-289.pdf. Accessed October 27, 2025. 24. Kate Gordon, Chief Executive Officer, California Forward. August 28, 2025. Written testimony to the 32. Little Hoover Commission. June 2025. “Issue Brief: Commission. Page 1. https://lhc.ca.gov/wp-content/ Survey on California State Funding for Nonprofits.” uploads/Kate-Gordon-Chief-Executive-Officer- Page 5. https://lhc.ca.gov/wp-content/uploads/ California-Forward-Testimony_-Improving-State-Grant- Report-289.pdf. Accessed October 27, 2025. Administration-for-Nonprofits-002.pdf 33. Little Hoover Commission. June 2025. “Issue Brief: 25. Stacey Wiggall, Director of Training and Technical Survey on California State Funding for Nonprofits.” Assistance, National Alliance of Trauma Recovery Page 7. https://lhc.ca.gov/wp-content/uploads/ Centers (NATRC). August 28, 2015. Written testimony to Report-289.pdf. Accessed October 27, 2025. the Commission. Page 3. https://lhc.ca.gov/wp-content/ uploads/Testimony-Wiggall.pdf 34. Little Hoover Commission. June 2025. “Issue Brief: Survey on California State Funding for Nonprofits.” 26. Stacey Wiggall, Director of Training and Technical Page 5. https://lhc.ca.gov/wp-content/uploads/ Assistance, National Alliance of Trauma Recovery Report-289.pdf. Accessed October 27, 2025. Centers (NATRC). August 28, 2025. Written testimony to the Commission. Page 3. https://lhc.ca.gov/wp-content/ uploads/Testimony-Wiggall.pdf SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 17 35. Kate Gordon, Chief Executive Officer, California 42. California Environmental Protection Agency. Forward. August 28, 2025. Written testimony to the January 2025. Environmental Justice Action Grants Commission. Page 1. https://lhc.ca.gov/wp-content/ Program: Round 2 Program Guidelines. https:// uploads/Kate-Gordon-Chief-Executive-Officer- calepa.ca.gov/wp-content/uploads/2025/01/CalEPA_ California-Forward-Testimony_-Improving-State-Grant- EJ-Action-Grant-R2-FINAL-Program-Guidelines_ Administration-for-Nonprofits-002.pdf ENGLISH_012125.pdf. Accessed October 27, 2025. 36. Beth Hassett, Chief Executive Officer & Executive 43. State Water Resources Control Board. 2025. Director, WEAVE. October 24, 2019. Written testimony Drinking Water State Revolving Fund Program and to the Commission. Pages 4-5. https://lhc.ca.gov/wp- Complementary Programs: Draft Intended Use Plan. content/uploads/sites/lhc.ca.gov/files/Reports/249/ https://www.waterboards.ca.gov/drinking_water/ WrittenTestimony/3.-Hassett-Testimony.pdf. Accessed services/funding/documents/2025/draft_2025-26- November 3, 2025. dwsrf-iup_final.pdf. Accessed October 27, 2025. 37. Little Hoover Commission. June 2025. “Issue Brief: 44. California Department of Finance. January 10, Survey on California State Funding for Nonprofits.” 2025. “Advance Payment Pilot Program Report.” Page Page 10. https://lhc.ca.gov/wp-content/uploads/ 1. https://dof.ca.gov/media/docs/reports/other/ Report-289.pdf. Accessed October 27, 2025. Advanced_Payment_Pilot_Program_Report-AB_156. pdf. Accessed October 27, 2025. 38. Little Hoover Commission. June 2025. “Issue Brief: Survey on California State Funding for Nonprofits.” 45. Little Hoover Commission. June 2025. “Issue Brief: Page 14. https://lhc.ca.gov/wp-content/uploads/ Survey on California State Funding for Nonprofits.” Report-289.pdf. Accessed October 27, 2025. Page 9. https://lhc.ca.gov/wp-content/uploads/ Report-289.pdf. Accessed October 27, 2025. 39. Little Hoover Commission. June 2025. “Issue Brief: Survey on California State Funding for Nonprofits.” 46. Code of Federal Regulations. Section 200.414 Page 14. https://lhc.ca.gov/wp-content/uploads/ Indirect Costs. https://www.ecfr.gov/current/title-2/ Report-289.pdf. Accessed October 27, 2025. subtitle-A/chapter-II/part-200/subpart-E/subject- group-ECFRd93f2a98b1f6455/section-200.414. 40. California Strategic Growth Council. March 15, 2023. Community Assistance for Climate Equity Program: 47. See AB 880 (2025, Bennett), SB 336 (2023, Regional Climate Collaboratives Program: Round Umberg), and SB 1069 (2022, Umberg). 48. 2 Draft Guidelines. https://sgc.ca.gov/wp-content/ 48. Governor Gavin Newsom. September 29, 2024. uploads/20230315-R2_RCC_Program_Guidelines.pdf. Veto Message: SB 336. https://www.gov.ca.gov/wp- Accessed October 27, 2025. Also, Strategic Growth content/uploads/2024/09/SB-336-Veto-Message.pdf. Council. September 29, 2025. Community Resilience Centers (CRC) Program: Round 2 Program Guidelines. 49. Geoff Green, Chief Executive Officer, California https://sgc.ca.gov/wp-content/uploads/CRC-Draft- Association of Nonprofits. August 28, 2025. Round2-Guidelines_REMEDIATED_20250918-1.pdf. Testimony to the Commission. https://youtu.be/ Accessed October 27, 2025. G6UpwL25280?t=2212. 36:52. 41. California Air Resources Board. March 2024. Access 50. California Penal Code. Section Clean California: Appendix B: Sample Grant Agreement. 13823.15(f)(4). https://leginfo.legislature. https://ww2.arb.ca.gov/sites/default/files/2024-03/ ca.gov/faces/codes_displaySection. Access%20Clean%20CA%20Solicitation%20FY%20 xhtml?sectionNum=13823.15.&lawCode=PEN. 23-24%20Appendix%20B%20Sample%20Grant%20 Agreement.pdf. Accessed October 27, 2025. 18 | LITTLE HOOVER COMMISSION 51. Kate Gordon, Chief Executive Officer, California Forward. August 28, 2025. Testimony to the Commission. https://youtu.be/G6UpwL25280?t=4342. 1:12:22. 52. Little Hoover Commission. June 2025. “Issue Brief: Survey on California State Funding for Nonprofits.” Page 9. https://lhc.ca.gov/wp-content/uploads/ Report-289.pdf. Accessed October 27, 2025. 53. California.gov. Departments list. https://www. ca.gov/departments/list/. Accessed October 27, 2025. Also, California State Controller’s Office. September 2025. State Employee Demographics. https://sco. ca.gov/ppsd_empinfo_demo.html. Accessed October 27, 2025. 54. California Association of Nonprofits. August 19, 2025. Written testimony to the Joint Hearing of the California Senate and Assembly Select Committees on the Nonprofit Sector. Pages 4-5. https://calnonprofits. org/wp-content/uploads/2025/08/2025-background- joint-select-nonprofit-sector-committee-hearing- 08.19.25-final.pdf. Accessed October 27, 2025 55. California Association of Nonprofits. “Office of Nonprofit Empowerment.” Page 2. 56. California Department of Finance. January 10, 2025. “Advance Payment Pilot Program Report.” Page 1. https://dof.ca.gov/media/docs/reports/other/ Advanced_Payment_Pilot_Program_Report-AB_156.pdf. Accessed October 27, 2025. 57. Kate Gordon, Chief Executive Officer, California Forward. August 28, 2025. Written testimony to the Commission. Page 1. https://lhc.ca.gov/wp-content/ uploads/Kate-Gordon-Chief-Executive-Officer- California-Forward-Testimony_-Improving-State-Grant- Administration-for-Nonprofits-002.pdf 58. Kate Gordon, Chief Executive Officer, California Forward. August 28, 2025. Testimony to the Commission. https://youtu.be/G6UpwL25280?t=3544. 59:03. SHARED PRIORITIES, STRAINED SYSTEMS: MODERNIZING STATE GRANTS AND CONTRACTS WITH NONPROFITS | 19 Little Hoover Commission Members PEDRO NAVA | Santa Barbara GIL GARCETTI | Los Angeles Appointed to the Commission by Speaker of the Assembly Appointed to the Commission by Governor Gavin John Pérez in April 2013 and reappointed by Speakers Newsom in November 2021. Professional photographer Rendon in 2017 and 2021 and Rivas in 2024. Government and author of ten books. Former Los Angeles County relations advisor. Former State Assemblymember from District Attorney, teaching Fellow at Harvard University’s 2004 to 2010, civil litigator, deputy district attorney and Kennedy School, and president of the California Science member of the state Coastal Commission. Elected chair of Center Foundation’s Board of Trustees. the Commission in March 2014. JOSÉ ATILIO HERNÁNDEZ | Burbank ANTHONY CANNELLA | Ceres Appointed by Speaker of the Assembly Anthony Rendon Appointed to the Commission by the Senate Rules in April 2023. Founder and CEO of IDEATE California. Also, Committee in March 2022. Civil engineer and principal Founder and Board Chairman of ideateLABS non profit. with Northstar Engineering Group. Former State Senator from 2010 to 2018. Previously served on the Ceres City JASON JOHNSON | Napa Council and was twice elected mayor of that city. Elected Appointed by Governor Newsom in June 2023. Member Vice Chair of the Commission in July 2023. of the Land Trust of Napa County Board of Trustees and Honorary Commander of Travis Air Force Base. Former DION ARONER | Berkeley Managing Partner at Founders Den. Founder and former Appointed to the Commission by the Senate Rules CEO at August Home Inc. Committee in April 2019. Partner for Aroner, Jewel, and Ellis. Former State Assemblymember from 1996 to GAYLE MILLER | Sacramento 2002, chief of staff for Assemblymember Tom Bates, Managing Director of Transition, Institutional social worker for Alameda County, and the first female Relationships and Investments for Brookfield Asset president of Service Employees International Union 535. Management and Vice-Chair of the Delta Stewardship Council. Previously served as Senior Counselor on DAVID BEIER | San Francisco Infrastructure and Clean Energy Finance for Governor Appointed to the Commission by Governor Edmund G. Newsom and Chief Deputy of Policy at the California Brown Jr. in June 2014 and reappointed in January 2018. Department of Finance. Appointed to the Commission by Managing director of Bay City Capital. Former senior Governor Gavin Newsom in January 2025. officer of Genentech and Amgen, and counsel to the U.S. House of Representatives Committee on the Judiciary. SENATOR ROGER NIELLO | Fair Oaks Elected in 2022 to represent the 6th Senate District. SENATOR CHRISTOPHER CABALDON | West Former President and CEO of the Sacramento Metro Sacramento Change of Commerce and University of California Center Elected in 2024 to represent the 3rd Senate District. Sacramento Governance Fellow. Previously served on Former Mayor of West Sacramento for two decades. the Sacramento County Board of Supervisors and the Served as Vice Chancellor of the California Community California State Assembly. Appointed by the Senate Rules Colleges and director of the State Assembly Higher Committee in February 2025. Education Committee. Previously appointed by President Obama to the National Advisory Board of America’s ASSEMBLYMEMBER LIZ ORTEGA | San Leandro College Promise. Appointed to the Commission by the Elected in November 2022 to represent the 20th Senate Rules Committee in February 2025. Assembly District. Executive Secretary-Treasurer of the Alameda Labor Council. Former Statewide Political ASSEMBLYMEMBER PHILLIP CHEN | Yorba Linda Director for AFSCME Local 3299. Appointed by Speaker of Appointed to the Commission by Speaker of the Assembly the Assembly Rendon in March 2023. Anthony Rendon in October 2021. Elected in November 2016 to represent 55th District. Represents portions of JANNA SIDLEY | Los Angeles Los Angeles, Orange and San Bernardino counties and Appointed to the Commission by Governor Edmund the cities of Brea, Chino Hills, Diamond Bar, La Habra, G. Brown Jr. in April 2016 and reappointed in February Industry, Placentia, Rowland Heights, Walnut, West Covina 2020. Partner at Ichor Strategies and appointed to the and Yorba Linda. Board of the Los Angeles City Employee Retirement System (“LACERS”). Former general counsel at the Port of Los Angeles and city attorney at the Los Angeles City Attorney’s Office. 20 | LITTLE HOOVER COMMISSION “DEMOCRACY ITSELF IS A PROCESS OF CHANGE, AND SATISFACTION AND COMPLACENCY ARE ENEMIES OF GOOD GOVERNMENT.” By Governor Edmund G. “Pat” Brown, addressing the inaugural meeting of the Little Hoover Commission, April 24,1962, Sacramento, California Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov